A Theoretical and Empirical Investigation of Cooperative Market Power and Its Effects on Member Welfare in Agricultural Markets in Nigeria

Cooperative societies in agricultural markets theoretically exercise collective market power that enables members to negotiate better prices and terms with buyers and input suppliers. However, the extent to which Nigerian agricultural cooperatives actually exercise and translate market power into member welfare improvements, and under what conditions this relationship holds, has not been theoretically specified or empirically examined. This study conducted an original theoretical and empirical investigation of cooperative market power and its effects on member welfare in Nigerian agricultural markets. A two-stage theory-building and empirical testing methodology was employed. The theoretical stage developed a formal model of cooperative market power in Nigerian agricultural commodity markets, drawing on monopsony theory, cooperative patronage theory, and bilateral market negotiation models, generating four testable propositions on the conditions under which cooperative market power translates to member welfare gains. The empirical stage tested these propositions using a multi-state dataset covering 180 cooperatives in nine commodity market clusters across cassava (South East), groundnut (North West), palm oil (South South), cowpea (North East), and cocoa (South West) markets. Market power was measured through price-setting behaviour indicators, switching cost metrics, and volume concentration ratios. Member welfare was measured through farmgate price premium, input cost savings, and income stability. Random effects regression and instrumental variable estimation were employed. The theoretical model was partially confirmed, with four of seven hypothesised market power-welfare pathways confirmed empirically. Original contributions include the Cooperative Market Power Threshold model identifying minimum market share required for member welfare gains and a typology of cooperative market power mechanisms differentiated by commodity class.

Keywords: cooperative market power, member welfare, agricultural markets, Nigeria, commodity cooperatives